For Low-Cost Direct Green Power, Downstream Demand Determines Survival (AI Translation)

【周刊提前读】绿电低价直供 下游需求定生死

[para. 1] The climate transition is transforming global trade and supply chains, presenting new opportunities for developing countries. Zhang Lei, Chairman of China's Envision Group, highlighted at the Winter Davos Forum how countries like Morocco, Brazil, and Australia could emerge as key players in green energy production. [para. 2] Envision Group is seizing this trend with projects like the Chifeng Green Hydrogen-Ammonia Project in Inner Mongolia, which utilizes wind and solar power to produce green hydrogen and ammonia. [para. 3] The project revolves around an "isolated grid," which isn't connected to the national power grid, reducing costs significantly. This approach offers a competitive electricity price, already nearly 60% cheaper per kilowatt-hour compared to traditional grids.

[para. 4] The Chifeng project uses renewable energy to produce hydrogen through water electrolysis, then converts it into green ammonia. Planned in three phases, it aims for full production by 2025-2026. Phase 0 faced initial setbacks in energy forecasting, necessitating grid backup. [para. 5] Despite being called "isolated," the project maintains a "weak connection" to the main grid, drawing only 10% of its load for support. This model allows excess energy to be sold back to the grid. The project's primary aim is to export green ammonia, creating a commercial model from production to sales.

[para. 6] One novelty of the project is its small-scale, dynamically loaded ammonia synthesis tower, a challenge given the power supply's volatility. [para. 7] Envision uses self-developed technology throughout the process, from energy generation to ammonia synthesis units, adjusting equipment in its experimental phase to optimize the use of wind and solar energy. [para. 8] China's Inner Mongolia has introduced policies supporting these integrated projects, offering exemptions on system fees, enhancing the project's economic viability.

[para. 9] Producing green ammonia involves air and water, with electricity for water electrolysis being the largest cost. Avoiding grid electricity purchase largely helps reduce overall costs. [para. 10] Other major green hydrogen efforts include Sinopec’s large-scale plant in Xinjiang. [para. 11] The Chifeng model focuses on overcoming transportation challenges and high costs associated with green hydrogen, branding it as the world’s first unsubsidized commercial green ammonia project.

[para. 12] Exporting green ammonia overseas, especially to the European Union, is crucial for the project's viability, given the higher price premiums in the EU market compared to the domestic gray ammonia market. [para. 13] The future of green energy’s economic value depends on rising coal prices and the decreasing cost of green electricity. This shift could make green hydrogen more cost-effective than coal-based alternatives.

[para. 14] Envision's significant investment points to the rapidly declining costs of photovoltaic power, particularly in regions with abundant solar power like western Inner Mongolia. [para. 15] China is implementing policies to promote the use of green ammonia in place of carbon-heavy gray ammonia in the chemical industry. [para. 16] Legislation is pushing for renewable energy to produce green hydrogen and ammonia, of which surplus can be used to reduce coal consumption in power generation.

[para. 17] The domestic demand for green ammonia is rising, particularly in economically developed areas, supporting initiatives for enhanced green energy infrastructure. [para. 18] China has witnessed a surge in green ammonia projects, although many are still under construction. [para. 19] One challenge for Chinese projects is meeting the EU's stringent certification standards, crucial for exporting green hydrogen products.

[para. 20] Local competition among Chinese regions to attract green energy projects is intense, with areas like Inner Mongolia and Henan making significant investments. [para. 21] These efforts are often aimed at industries like aluminum production, looking to leverage low electricity costs. [para. 22] Jiangsu and other provinces are devising policy frameworks for direct green electricity supply to attract investments.

[para. 23] Jiangsu is actively working on initiatives to improve its green electricity infrastructure. [para. 24] Power companies are prioritizing plant location and improved grid connections to foster sustainable growth. [para. 25] The overarching aim is a “green and low-cost” model that could reshape China's industrial fabric within the dual constraints of environment and economy.